Stock Position Sizing Calculator
Position sizing is one of the most important concepts in risk management. Rather than buying an arbitrary number of shares, you calculate the correct number of shares based on how much you are willing to lose if the trade goes against you. The formula is simple: divide your maximum dollar risk per trade by the per-share risk (entry price minus stop-loss price). This ensures every trade has a consistent, controlled risk regardless of the stock's price. Enter your account size, risk percentage, entry price, and stop price to find the number of shares and total position size.
Position sizing formula
Max risk = account size * (risk % / 100)
Risk per share = entry price - stop price
Shares = max risk / risk per share
Position value = shares * entry price
Shares are calculated as a decimal; in practice you would round down to the nearest whole share. The total position value shows how much capital is committed. If the position value exceeds your available capital, reduce the risk percentage or move the stop closer to entry.
Risk management principles
- Risk 1% to 2% per trade: with 20 consecutive losses (unlikely if your system has any edge), a 2% risk rules means the account would drop to about 67% of its starting value.
- Stop placement should be at a technically significant level, not based purely on dollar amount.
- Position sizing applies equally to stocks, ETFs, options (via delta), and other instruments.
- The SEC requires brokers to disclose margin requirements and risks of leveraged trading; position sizing is even more critical when using margin.
- Consistent position sizing across trades lets your edge express itself statistically over many trades.
Frequently asked questions
What is position sizing?
Position sizing determines how many shares to buy so that if your stop-loss is triggered, you lose only a predetermined dollar amount (your risk per trade). It is a fundamental risk management technique in both trading and investing.
What is the formula for position sizing?
Shares = risk per trade / (entry price - stop price). For example, if you risk $500 per trade, buy at $50, and set a stop at $45 (a $5 per share risk), you buy 500/5 = 100 shares. If stopped out, the loss is exactly $500.
How much should I risk per trade?
A common rule is to risk no more than 1% to 2% of total account equity per trade. With a $50,000 account, that is $500 to $1,000 per trade. This approach ensures that a string of losing trades does not destroy the account.
What is a stop-loss?
A stop-loss is a predefined price at which you sell the position to cap your loss. It should be placed at a technically significant level (below a support level for a long trade), not an arbitrary distance from the entry. The stop-loss price determines how many shares you can safely buy.
Does position sizing guarantee I won't lose more?
Not with absolute certainty. Gaps in stock prices (especially overnight or on news) can cause the actual exit price to be worse than the stop-loss. This is called slippage. Position sizing minimizes risk but cannot eliminate gap risk or execution failures.
Official sources
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.